IFRS 12 , paras 24, 29-31 disclosure regarding unconsolidated structured entities

SoftBank Group Corp. – Annual report – 31 March 2018

Industry: telecoms, software

  1. Structured entities

(1) Consolidated structured entities

The Company owns investment funds which are structured entities consolidated by the Company. These funds are structured as venture funds in the form of partnerships and limited partnerships for investment, and designed so that the voting rights or similar rights are not determinant in evaluating control. The Company evaluated that it controls the operation of those structured entities.

Please refer to “a. Consolidation of SoftBank Vision Fund and Delta Fund business by the Company” under “(21) Significant accounting policies for SoftBank Vision Fund and Delta Fund” in “a. Consolidation of the SoftBank Vision Fund and Delta Fund business by the Company” in “Note 3. Significant accounting policies” for evaluation of control over the following entities that comprise SoftBank Vision Fund and Delta Fund business.

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The Company is engaged in investment commitment contracts with certain consolidated structured entities.

The Company has not provided, nor intends to provide, any significant financial support or other significant support to the consolidated structured entities without contractual obligation.

(2) Unconsolidated structured entities

The Company owns investment funds, which are structured entities that are not consolidated by the Company. These funds are structured as venture funds in the form of partnerships, limited partnerships for investment and investment trusts, and designed so that the voting rights or similar rights are not determinant in evaluating control. The third parties control the operation of these structured entities. The funds are financed by the subscription by its partners.

The scale of the structured entities which are not consolidated, the carrying amount of the investment in the entities by the Company, and the potential maximum loss exposure of the Company are as follows:

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The investment recognized by the Company is included in “Investments accounted for using the equity method” or “Investment securities” in the consolidated statement of financial position. There is no liability to recognize related to unconsolidated structured entities.

The potential maximum loss exposure incurred from the involvement with the structured entities is limited to the total of the carrying amount of the Company’s investment and commitment regarding additional investment.

The Company’s maximum loss exposure represents the potential maximum loss amount, and does not indicate any estimated loss amount by being involved with structured entities.

The Company has not provided, nor intends to provide, any financial support or other significant support to the unconsolidated structured entities above without contractual obligation.

  1. Significant accounting policies (extract)

(21) Significant accounting policies for SoftBank Vision Fund and Delta Fund

a. Consolidation of the SoftBank Vision Fund and Delta Fund business by the Company

SoftBank Vision Fund and Delta Fund are Limited Partnerships established by the General Partner which is a wholly-owned subsidiary of the Company, and by their form of organization, qualify as structured entities. SoftBank Vision Fund and Delta Fund are consolidated by the Company for the following reasons.

The various entities comprising SoftBank Vision Fund and Delta Fund make investment decisions through their respective Investment Committee, which were established as committees of SB Investment Advisers (UK) Limited (“SBIA”). SBIA is an advisory company and is a wholly-owned subsidiary of the Company. As such, the Company exerts control over SoftBank Vision Fund and Delta Fund. Furthermore, SBIA receives performance fees and the Company receives distributions attributable to Limited Partners based on the investment performance as returns from the Funds. The Company has the ability to affect those returns through its control over the Funds, and therefore, the Company is deemed to have control as stipulated in IFRS 10 over each Fund.

Inter-company transactions such as management fees and performance fees to SBIA paid or to be paid from SoftBank Vision Fund and Delta Fund are eliminated in consolidation.

b. Portfolio company investments made by SoftBank Vision Fund and Delta Fund

(a) Investments in subsidiaries

Of the portfolio company investments made by SoftBank Vision Fund, the portfolio companies that the Company is deemed to control under IFRS 10 are subsidiaries of the Company. Accordingly, their results of operations, assets and liabilities are included in the Company’s consolidated financial statements.

Gain and loss on investments in the subsidiaries of the Company which are recognized in the SoftBank Vision Fund are eliminated in consolidation.

(b) Investments in associates

Of the portfolio company investments made by SoftBank Vision Fund and Delta Fund, the portfolio companies over which the Company has significant influence under IAS 28 “Investments in Associates and Joint Ventures” are associates of the Company.

The investments in associates of the Company made by SoftBank Vision Fund and Delta Fund are

accounted for as financial assets at FVTPL in accordance with paragraph 18 of IAS 28, and presented as “Investments from SoftBank Vision Fund and Delta Fund accounted for using FVTPL” in the consolidated statement of financial position. The payments for these investments are presented as “Payments for acquisition of investments by SoftBank Vision Fund and Delta Fund” under cash flows from investing activities in the consolidated statement of cash flows.

(c) Other investments

Investments other than those in subsidiaries or associates of the Company made by the SoftBank Vision Fund and Delta Fund are accounted for as financial assets at FVTPL. The presentation of these investments in the consolidated statement of financial position and the consolidated statement of cash flows are the same as the above “(b) Investments in associates.”

c. Presentation of the results from the SoftBank Vision Fund and Delta Fund business

Income and loss arising from the SoftBank Vision Fund and Delta Fund business are separated from operating income and loss arising from other businesses, recognized as a component of operating income, and presented as “Operating income from SoftBank Vision Fund and Delta Fund” in the consolidated statement of income. Gain and loss arising from “b. Portfolio company investments made by SoftBank Vision Fund and Delta Fund” (realized gain and loss on sales of investments, unrealized gain and loss on valuation of investments, interest and dividend income from investments, except for gain and loss on investments in subsidiaries) and operating expenses such as incorporation expenses of entities that comprise SoftBank Vision Fund and Delta Fund, investment research expenses arising from SBIA and other Japan and U.S. advisory companies which support SBIA, and administrative expenses arising from each entity, are included in “Operating income from SoftBank Vision Fund and Delta Fund.”

d. Investments made by the Company based on the premise of transferring to SoftBank Vision Fund and Delta Fund

Investments in associates or other investments made by SoftBank Group Corp. or its subsidiaries based on the premise of transferring to SoftBank Vision Fund and Delta Fund are designated as financial assets at FVTPL. In cases where the investees are the Company’s subsidiaries and the Company is transferring those investments to SoftBank Vision Fund, the investments are accounted for in accordance with the above “b. (a) Investments in subsidiaries,” regardless of whether the investments are agreed to be transferred.

(a) Investments made in the current fiscal year based on the premise of transfer

If the investments are agreed to be transferred from the Company to SoftBank Vision Fund or Delta Fund, and regulatory approval to make the investments by SoftBank Vision Fund or Delta Fund is obtained (such investments, “Agreed Transferable Investments”) as of the end of the current fiscal year, the Company presents items relevant to those investments as “Investments from SoftBank Vision Fund and Delta Fund accounted for using FVTPL” in the consolidated statement of financial position, “Operating income from SoftBank Vision Fund and Delta Fund” in the consolidated statement of income, and “Payments for acquisition of investments by SoftBank Vision Fund and Delta Fund” under cash flows from investing activities in the consolidated statement of cash flows, as though SoftBank Vision Fund and Delta Fund made those investments from the date when the Company had initially made the investments.

On the other hand, if the investments have not yet become the Agreed Transferable Investments as of the end of the current fiscal year, the Company presents items relevant to those investments as “Investment securities” in the consolidated statement of financial position, “Loss from financial instruments at FVTPL” in the consolidated statement of income, and “Payments for acquisition of investments” under cash flows from investing activities in the consolidated statement of cash flows.

(b) Investments made prior to the current fiscal year based on the premise of transfer

If the investments become the Agreed Transferable Investments in the current fiscal year, the Company presents items relevant to those investments as “Investments from SoftBank Vision Fund and Delta Fund accounted for using FVTPL” in the consolidated statement of financial position and “Operating income from SoftBank Vision Fund and Delta Fund” in the consolidated statement of income for the current fiscal year, as though the investments were agreed to be transferred at the beginning of the current fiscal year. In such case, corresponding comparative information for the previous fiscal year is presented as “Investment securities” in the consolidated statement of financial position, “Loss from financial instruments at FVTPL” in the consolidated statement of income, and “Payments for acquisition of investments” under cash flows from investing activities in the consolidated statement of cash flows.

e. Contribution from Limited Partners to SoftBank Vision Fund and Delta Fund

SoftBank Vision Fund and Delta Fund issue capital calls from their respective limited partners (“Capital Call”).

(a) Contribution from Limited Partners other than the Company

The interests attributable to limited partners of SoftBank Vision Fund and Delta Fund other than the Company (“Third-Party Investors”) are classified as financial liabilities, “Third-party interests in SoftBank Vision Fund and Delta Fund” in the consolidated statement of financial position, due to the predetermined finite life (at least 12 years from the final closing) and contractual payment provision to each of the limited partners at the end of the finite life within SoftBank Vision Fund and Delta Fund’s limited partnership agreements. The liabilities are classified as “financial liabilities measured at amortized cost” upon initial recognition. The carrying amounts attributable to Third-Party Investors represent the amounts that would be distributed in accordance with the limited partnership agreement in a theoretical liquidation scenario at the end of each quarter.

“Third-party interests in SoftBank Vision Fund and Delta Fund” fluctuate due to the results of SoftBank Vision Fund and Delta Fund in addition to contributions from Third-Party Investors in satisfaction of Capital Calls, and distributions and repayments of investments to Third-Party Investors. The fluctuations due to the results of SoftBank Vision Fund and Delta Fund are presented as “Change in third-party interests in SoftBank Vision Fund and Delta Fund” in the consolidated statement of income.

Contributions from Third-Party Investors to SoftBank Vision Fund and Delta Fund are included in “Contributions into SoftBank Vision Fund and Delta Fund from third-party investors” under cash flows from financing activities in the consolidated statement of cash flows. The distributions and repayments of investments to Third-Party Investors are included in “Distribution/repayment from SoftBank Vision Fund and Delta Fund to third-party investors” under cash flows from financing activities in the consolidated statement of cash flows.

Uncalled committed capital from Third-Party Investors is not subject to IAS 39, “Financial Instruments: Recognition and Measurement,” and therefore such amount is not recorded in the consolidated statement of financial position. Uncalled committed capital from Third-Party Investors for SoftBank Vision Fund and Delta Fund as of March 31, 2018 is $49.0 billion. 

(b) Contribution from the Company

Contribution from the Company to SoftBank Vision Fund and Delta Fund as a limited partner is eliminated in consolidation.

 

 

 

 

 

 

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